Established in 2008, this blog is an independent, common sense, look at challenges and opportunities in sports and financial investing, with occasional diversions as my mood takes me. I am not a tipster, nor is this a Profit and Loss report either. They are boring.

Thursday, 24 January 2013

An interesting article on the Pinnacle site, looking at Betfair's liquidity woes, while at the same time banging their own drum a little of course.

Internet forums are awash with theories as to why liquidity may be lower for the Australian Open, with suggestions falling into two categories: event specific issues and general changes to exchange betting conditions:Declining Tennis Liquidity – Event Specific FactorsBetfair is by far the dominant betting exchange in terms of volume with its customer base skewed towards the United Kingdom – generating 53% of all volume in 2012. With many Australian Open games played between 1am and 5am GMT it’s almost certain that available liquidity is impacted by the unfavourable timing for Betfair’s core player base. This is particularly acute for those bettors interested in betting in-play, on peripheral courts and on games without star appeal.On top of the time zone issue, television coverage in the UK of the Australian Open is the patchiest of all the Grand Slams, with neither of the main broadcasters – BBC or Sky – showing early round games live. With exchanges, there is a direct correlation between live coverage of an event and volume/liquidity.To make matters worse, Betfair also has a special arrangement with Australian betting regulators, which requires customers betting on events taking place Down Under to transfer funds to a specific Australian Wallet. This impractical step may also be enough to put off some bettors.

Declining Tennis Liquidity – General Exchange Factors

Alongside the event specific issues, discussions around declining exchange liquidity are a daily feature on forums and are relevant for the Australian Open problem. The following points are structural issues that many bettors feel are impacting liquidity.In 2008 Betfair introduced a Premium Charge on bettors whose winnings were deemed to be disproportionately high, when compared to the amount of commission they pay. In 2011 this was as high 60%, and these draconian measures are seen by many as the root cause of drops in liquidity. Big players may be mitigating their exposure to the Premium Charge by reducing the amount of backing and laying that they do, which depletes the available action in markets.One of the main online betting forum threads that often re-occurs, is the suggestion that a lot of so-called ‘market-makers’ have reduced or stopped their activity. This is especially relevant for the peripheral games in the early rounds of the Australian Open where the lack of liquidity has been so noticeable.

Declining Tennis Liquidity – Poor Liquidity & ValueIn theory, an exchange should offer a free market for betting on any given event, and free market economics suggest that the odds should quickly move to a ‘true value’ position. Backers and layers both seek optimal returns so the differential between the two should diminish, and this should produce close to a 100% market – one with no margin.If there is enough volume and the market is efficient, this may be true. But unfortunately for successful exchange bettors, they are then slapped with a 5% commission on winnings. Unfortunately for Australian Open bettors, this commission still applies even when the market is inefficient, such as when there is a lack of volume.And on top of the reduction in value that poor liquidity brings, this situation also restricts what should be one of the greatest attractions of exchanges: the freedom to hedge positions to lock in profit. Without the money on offer, bettors are either forced to take whatever odds are on offer, or sit on their hands.Declining Tennis Liquidity – Not at Pinnacle SportsWhile liquidity appears to be declining on exchanges like Betfair, it is going in the opposite direction at Pinnacle Sports. We have a long-standing reputation for offering the highest fixed odds limits online, yet these have been raised even higher for the 2013 season.You’ll find Win Odds (Money Lines) and Totals increased by 25% and Handicaps brought in line with Win Odds, which is an increase of at least 50%. As bettors can re-bet at the maximum limit, Pinnacle Sports offer almost unlimited potential liquidity and the ability to build positions.Higher limits aren’t the only reason Pinnacle Sports are a much better option for tennis bettors than an exchange; our margins are far lower after commission is factored in, so we offer far better value, providing a better chance to win more. This is especially true for tennis with margins as low as 2%.

Unlike exchanges, there is no sting in the tail at Pinnacle Sports as we do not levy any commission or charges on successful players, nor do we close or limit the accounts of successful players; our high volume/low margin business model needs sharp players.So if you are looking for better tennis liquidity for the Australian Open, free of commission and Premium Charge, Pinnacle Sports will stand your bets, and win or lose, you can come back and keep betting with guaranteed high limits.

2 comments:

One interesting thing, which is not mentioned in the writing from Pinny is the difference in terms of being a "bettor" og being a "trader". Normally i dont think a bettor would look to "Lock in profit", which is the case when trading (unless you turn your trading position into a bet, which can be a good idea, if the value is huge). Another, smaller, reason for the lack if liquidity is the fact that more and more countries faces new gambling laws and other restrictions. At the moment, its not legal to bet on the Australian market using Betfair, when living in Denmark. We might not provide the biggest of liquidity, but the it might be the case from other, bigger countries too.Best regardsTytteboevs

About Me

I have had a life-long interest in sports and after studying Pure Mathematics with Statistics at secondary school, have been fascinated by odds and probability.
The first system I came up with was a simple one - back the favourite and double up after a loss until a winner. Simple enough in theory, and I told my Dad about it. Not being a betting man himself, he ran it by some of his colleagues, and came home to tell me that it wouldn’t work because a long losing run would mean that the bank would be empty. Then there was always the possibility that the winner would be returned at odds-on, meaning that the total returns would not match the outlay. Not what a ten year old wants to hear! Only slightly daunted, I then went on a search for the Holy Grail, the secret to riches that I knew was out there somewhere. Finally in 2004 I stumbled across an article about Betting Exchanges and four years on I am able to make a steady profit. I am at that age where I can start thinking about retirement and anything I make from trading sports will bring that day forward.